December 21, 2018

On December 20, 2018, the Ontario Court of Appeal released its decision in the Rana Plaza Class Action (Das v George Weston Limited, 2018 ONCA 1053) affirming the Ontario Superior Court of Justice’s decision to dismiss the claim. The claim was brought as a proposed class action in Ontario on behalf of individuals injured in the collapse of the Rana Plaza building in Dhaka, Bangladesh in 2013 and their families. 2,520 were injured and 1,130 died in the collapse.

The plaintiffs sued Canadian retailer Loblaw Inc. and three affiliates (including Joe Fresh Apparel Canada Inc.), which had indirectly sourced clothing through factories in Rana Plaza, and French testing, inspection, and certification company Bureau Veritas SA and two affiliates, which Loblaws engaged to perform two limited social audits of a factory in Rana Plaza. The social audits did not include auditing Rana Plaza’s structural integrity. Bennett Jones LLP were lawyers for the Bureau Veritas defendants. The plaintiffs alleged that the adoption by Loblaws of a corporate social responsibility (CSR) policy created a duty to protect factory workers down the supply chain (and other individuals in Rana Plaza) from structural safety issues. The plaintiffs sought $2 billion in damages.

At the Superior Court, Justice Perell held that the law of Bangladesh governs the plaintiffs’ claim, that the claim was limitations-barred for all class members other than those who were minors at the time of the collapse, and that the defendants did not owe the class members a duty of care. Justice Feldman, writing for the Court of Appeal, agreed. The decision is critical for companies sourcing from offshore manufacturers or that have otherwise incorporated (or are considering incorporating) CSR policies and procedures into their businesses but are concerned about potential liability.

Choice of Laws—Bangladesh Law Applies

As at the Superior Court, the Court of Appeal determined that Bangladesh law governs the plaintiffs’ claim. The plaintiffs argued that certain pleadings connect the claim to Ontario. In particular, the plaintiffs argued that Loblaws assumed responsibility over worker safety, determined the scope of audits and declined to take remedial action in Ontario. The plaintiffs also argued that Bureau Veritas’ alleged failure to provide professional advice to Loblaws happened in Ontario.

The Court of Appeal rejected the plaintiffs’ arguments and held that the essence of the claim is based in the injuries. The Court concluded that, because those injuries occurred in Bangladesh, the governing law (or lex loci delicti) is that of Bangladesh.

Limitations—The Claim Is Barred by a One Year Limitation Period

The Court of Appeal affirmed Justice Perell’s determination that Bangladesh's one year limitation period applies to claims in wrongful death and personal injury. The Court further rejected the plaintiffs’ argument that the limitation period did not run with respect to Loblaws under section 13 of Bangladesh’s Limitation Act, 1908, which tolls the limitation period while a defendant is absent from the country. Referencing Indian case law, the Court of Appeal held that the provision does not apply because the plaintiffs pleaded that Loblaws was engaged in garment manufacturing activities in Bangladesh, and that Loblaws representatives visited Bangladesh.

Alleged Negligence—No Duty of Care

With respect to the claim against Loblaws, the Court of Appeal rejected the plaintiffs’ argument that the alleged duty of care is analogous to those found in English cases finding parent companies liable for the actions of subsidiaries. Among other things, Justice Feldman distinguished the English cases in that: (i) Loblaws had little control over the factories; (ii) Loblaws was not in the same business as the factories; (iii) Loblaws did not have superior knowledge or expertise about issues of structural safety; and (iv) Loblaws did not undertake to audit Rana Plaza for structural safety.

Similarly, with respect to the claim against Bureau Veritas, the Court held that it was plain and obvious that no duty of care was owed to the plaintiffs because Bureau Veritas did not undertake to inspect for structural integrity. As Justice Feldman recognized, no precedent case law imposes a duty of care on a service provider to a third party to perform an activity outside the scope of its limited retainer.

Conclusion

Like the Superior Court, the Court of Appeal held for the defendants on virtually every issue. The case offers a lesson for parties entering into contracts that may affect third parties. Both courts acknowledged the possibility that the defendants may owe duties of care to third parties, including the class members, but noted that the scope of that duty is limited by the defendants’ undertakings. Parties considering entering contracts should be mindful to only undertake those duties for which they are prepared to be responsible, both to the contracting parties and to third parties who may be affected.